Iowa Attorney General Tom Miller announced Friday that Wells Fargo Bank N.A. will pay $575 million to resolve claims that the bank violated state consumer protection laws over several sales practices, including creating unauthorized accounts, and other actions that affected millions of customers. Iowa joined Arizona, Connecticut and Pennsylvania in leading the investigation into Wells Fargo’s practices.
The settlement with 50 states and the District of Columbia addresses allegations that Wells Fargo:
- opened millions of unauthorized accounts and enrolled customers into online banking services without their knowledge or consent;
- improperly referred customers for enrollment in third-party renters and life insurance policies;
- improperly charged auto loan customers for force-placed and unnecessary collateral protection insurance;
- failed to ensure that customers received refunds of unearned premiums on certain optional auto finance products;
- incorrectly charged customers for mortgage rate lock extension fees.
Wells Fargo will also create a consumer restitution review program. Consumers who have not been made whole through restitution programs already in place can seek review of their inquiry or complaint by a bank escalation team for possible relief.
To date, this settlement represents the most significant engagement involving a national bank by state attorneys general acting without a federal law enforcement partner.
“This agreement is unique and one of the largest multistate settlements with a bank since the National Mortgage Settlement in 2012,” Miller said.
“This significant dollar amount, on top of actions by federal regulators, holds Wells Fargo accountable for its practices.”
Iowa’s share of the settlement is $6,180,941.33, which will go to the state’s Consumer Education and Litigation Fund.
Details of the allegations
Wells Fargo has identified more than 3.5 million accounts where customer accounts were opened, funds were transferred, credit card applications were filed, and debit cards were issued without the customers’ knowledge or consent. The bank has also identified 528,000 online bill pay enrollments nationwide that may have resulted from improper sales practices at the bank. In addition, Wells Fargo improperly submitted more than 6,500 renters insurance and/or simplified term life insurance policy applications and payments from customer accounts without the customers’ knowledge or consent.
The states alleged that Wells Fargo imposed aggressive and unrealistic sales goals on bank employees and implemented an incentive compensation program where employees could qualify for credit by selling certain products to customers. The states further alleged that the bank’s sales goals and the incentive compensation program created an impetus for employees to engage in improper sales practices to satisfy such sales goals and earn financial rewards. Those sales goals became increasingly harder to achieve over time, the states alleged, and employees who failed to meet them faced potential termination and career-hindering criticism from their supervisors.
The states also alleged that Wells Fargo improperly charged premiums, interest, and fees for force-placed collateral protection insurance to more than two million auto financing customers, despite evidence that the customers’ regular auto insurance policy was in effect, and despite numerous customer complaints about such unnecessary placements. (Many of those customers may not have suffered financial harm, however, because the policies were cancelled before the customers paid the charges). Wells Fargo has agreed to provide remediation of more than $385 million to approximately 850,000 auto finance customers. The remediation will include payments to more than 51,000 customers whose cars were repossessed. The CFPB and OCC are working to ensure that the auto finance customers are fully remediated by Wells Fargo.
Additionally, the states alleged that Wells Fargo failed to ensure that customers received proper refunds of unearned portions of optional Guaranteed Asset/Auto Protection (GAP) products sold as part of motor vehicle financing agreements. As a result, the bank has agreed to provide refunds totaling more than $37 million to certain auto finance customers.
Finally, the states alleged that Wells Fargo improperly charged residential mortgage loan consumers for rate lock extension fees even when the delay was caused by Wells Fargo, a practice contrary to the bank’s policy. Wells Fargo has identified and contacted affected consumers and has refunded or agreed to refund more than $100 million of such fees.
Wells Fargo has previously entered consent orders with federal authorities — including the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau — related to its alleged conduct. Wells Fargo has committed to or already provided restitution to consumers in excess of $600 million through its agreements with the OCC and CFPB as well as through settlement of a related consumer class-action lawsuit and will pay more than $1 billion in civil penalties to the federal government. Additionally, under an order from the Federal Reserve, the bank is required to strengthen its corporate governance and controls and is restricted from exceeding its total asset size.
As part of its settlement with the states, Wells Fargo has agreed to implement within 60 days a program through which consumers who believe they were affected by the bank’s conduct, but fell outside the prior restitution programs, can contact Wells Fargo to be reviewed for potential redress. Wells Fargo will create and maintain a website for consumers to use to access the program and will provide periodic reports to the states about ongoing restitution efforts.
More information on the restitution review program, including phone numbers and a dedicated website address for the program, will be available on or before Feb. 26, 2019.